A study by Copenhagen Economics (DK) For the European Commission (DG TRADE)

Transcription

1 A study by Copenhagen Economics (DK) For the European Commission (DG TRADE) 1

2 Japan s share of EU trade with the world EU27 Import from Japan 9,3% 8,3% 7,9% 7,7% 7,3% 5,4% 5,1% 4,9% 4,7% 4,6% EU27 Export to Japan 6,3% 5,7% 5,5% 4,2% 3,9% 4,8% 3,5% 3,2%

3 EU share of Japan's trade with the world (%) Japan Imports from EU27 Japan Exports to EU27 18,2% 17,6% 16,3% 17,2% 17,1% 15,8% 15,6% 15,8% 15,0% 13,2% 13,6% 13,9% 13,6% 13,2% 11,9% 10,7% 10,8% 9,5% Source: IMF (DoTS) 3

4 Ratio of EU exports* to destination market GDP [Xeu->j divided by GDPj] 0,050 0,045 0,040 0,035 0,030 0,025 Exports + 27 bn (+ 44% increase) 0,020 0,015 0,010 0,005 0,000 Rusia Canada S. Korea* China India Mexico USA Taiwan* Japan Current EU exports to Japan ~ 61 bn *) including service exports. Measured in values based on 2004 GTAP data. 4

5 Import Penetration major economies, 2004 Imports as share of domestic demand 0,20 0,18 0,18 0,18 0,17 0,17 0,16 0,14 0,14 0,14 0,12 0,12 0,10 0,08 0,06 0,08 0,08 0,06 0,04 0,02 - CAN KOR MEX EU CHN RUS IND BRA USA JPN 5

6 Import Penetration, 2004 Imports as share of domestic demand 1,00 0,90 0,87 0,80 0,70 0,60 0,50 0,40 0,30 0,20 0,10 0,41 0,29 0,23 0,20 0,19 0,18 0,17 0,12 0,12 0,09 0,08 0,05 0,03 0,03 0,03 0,02 0,01 0,01 0,01 Japan Average major economies 6

7 Distribution of trade across sectors (as a share of total trade)

8 Distribution of export across sectors (as a share of total trade)

9 Tariffs faced by EU exports to Japan Tariffs faced by Japan s exports to EU Value of exports, bn 74.8 bn Average tariff (on traded tariff lines) simple weighted

10 We know the NTMs faced by EU exporters How do we measure their importance? How do we measure their impact on trade? Lists of NTMs identified by EBC and for the RRD Survey of EU companies operating in Japan 10

11 Number of issues identified Total number of barriers: Only solveable with domestic reforms 30 Solvable in combination with domestic reforms Solvable with trade policy instruments Pharmaceuticals Food Office Automotive Cosmetics 7 Medical 1 3 Paper Aerospace Chemicals 1 Iron 11

12 Conformity assessement problems dominate Standards 15% Regulation 21% Conformity assessment 64% 12

13 Services sector issues: NTMs in Japan number of issues identified Solvable with traditional trade policy instruments Solvable in combination with domestic reforms Only solveable with domestic reforms Financial services 1 Communication services Insurance Air transport Business services Construction Water transport Other transport services 2 13

14 Take the trade cost of NTMs by sector Estimate a potential reduction in these costs Plug this into an economic model Calculate impact on trade, output, income 14

15 1) Quantity approach > gravity model Crude: NTM residuals in equation Better: use NTM indicator : dummy or TRI (used here for services and as checkpoint for goods) EU US study: TRI based on survey of traders (used here for NTMs on EU side) 2) Price approach > direct cost survey in Japan 15

16 TCEs= Trade Cost Equivalents Directcost measure from survey NTM inventory Business survey on Japanese NTMs Quantification of NTMs and calculationof TCEs The impact of the NTM converted into a tariff equivalent expressing how many percent the price abroad increases as a result of the NTM Gravity model with Japan specificfactor Gravity model with dummy variables Quantification of NTMs and calculationof TCEs TCEs Scenario definition and simulation Gravity model with NTM index from survey Global NTM survey Gravity model with NTM index Quantification of NTMs and calculationof TCEs 16

17 Survey of EU companies in Japan, in 7 sectors: Pharmaceuticals Medical devices Processed foods Motor vehicles, Transport equipment, Financial and telecom services Questions: Most important NTMs in their sector Sources of NTM costs Trade cost estimate 17

18 Trade cost equivalent, TCE 25% Remaining barrier Reduction potential 10% 4% Other 20% 9% Common positive and negative list of additives 15% 20% 15% 19% Introduction of new standards Review the pricing and reimbursement systems 10 % 19% Mutual recognition of conformity assessment 5% Use of international standards 0% 2% NTM estimate for EU pharma exports to Japan 24% Contribution to barrier reduction Harmonisation/convergence of regulations 18

19 Trade cost equivalent, TCE 35% Remaining barrier estimate Reduction potential 30% 25% 12% 20% 15% 7% 5% 7% 9% 11% 11% 12% Other Review the pricing and reimbursement systems Introduce third party certification system Simplification of certification procedures Suppliers declaration of conformity Speed up the certification process 10 % 5% 0% 18 % NTM estimate for EU medical device exports to Japan 18% 21% Contribution to barrier reduction Mutual recognition of conformity assessment procedures Harmonisation/convergen ce of rules and regulations Use of international standards 19

20 Trade cost equivalent, TCE 30% Remaining barrier 25% Reduction potential 3% 5% 5% 18% Ot her Review t he pricing and reimbursement systems Simplification of certification procedures 20% 9% 18% Harmonisation/ convergen ce of rules and regulations 15% 23% Mut ual recognition of conformity assessment procedures 10 % Common positive and negative list of additives 16% 30% Use of international standards 5% 0% NTM estimate for EU processed foods exports to Japan Contribution to barrier reduction 20

21 Trade cost equivalent, TCE 12% 10 % Remaining barrier Reduction potential 3% 3% 5% 23% Don't know Implementation of license system for distribution Suppliers declaration of conformity 8% 6% 4% 9% 28% Mutual recognition of conformity assessment procedures Harmonisation/convergen ce of rules and regulations Use of international standards 40% 2% 0% 1% NTM estimate for EU automobile exports to Japan Contribution to barrier reduction 21

22 Service sector Japan barriers against EU EU barriers against Japan Finance 15,8 11,3 Insurance 6,5 10,8 Business and ICT 2,5 14,9 Communications 24,7 11,7 Construction 2,5 4,6 Personal, cultural, other services 6,5 4,4 22

23 Baseline Max. scenario Change in pct. Goods Processed foods 2,73 2,74 0,4% Chemicals (incl. pharmaceuticals) 2,66 2,66 0,0% Motor vehicles 1,59 1,54 3,1% Transport equipment 0,46 0,46 0,0% Machinery (incl. medical devices) 3,18 3,20 0,6% Metals and metal products 1,54 1,54 0,0% Wood and paper products 2,12 2,13 0,5% Other sectors (incl. agriculture) 10,77 10,79 0,2% Services Finance & insurance 3,53 3,53 0,0% Transport service 1,05 1,06 1,0% Business services 18,17 18,20 0,2% Communications 2,08 2,08 0,0% Construction 6,12 6,14 0,3% Personal services 3,70 3,71 0,3% Other services 40,29 40,34 0,1% Total 100,00 100,14 0,01% 23

24 Baseline Max. scenario Change in pct. Goods Chemicals 2,56 2,57 0,4% Electrical machinery 1,56 1,65 5,8% Motor vehicles 2,16 2,43 12,5% Other transport equipment 0,42 0,45 7,1% Other machinery 3,54 3,34 5,6% Metals and metal products 1,91 1,90 0,5% Other sectors (incl. agri.) 9,82 9,72 1,0% Services Finance & insurance 5,39 5,40 0,2% Transport service 1,13 1,13 0,0% Business services 9,72 9,74 0,2% Communications 2,34 2,34 0,0% Construction 5,67 5,71 0,7% Personal services 3,45 3,45 0,0% Other services 50,33 50,50 0,3% Total 100,00 100,31 0,03% 24

25 Baseline trade volume Removing Tariffs Reducing NTMs Min. Max. Combined scenario Min Max Processed foods 4,3 4,8 0,3 1,0 5,1 5,9 Chemicals (incl. pharma) 9,1 1,0 5,3 10,0 6,3 11,0 Motor vehicles 5,6 0,6 1,8 4,7 2,4 5,4 Transport equipment 0,7 0,1 1,6 2,8 1,7 2,8 Machinery (incl. medical) 6,1 0,4 1,6 3,1 2,0 3,5 Metals and metal products 1,4 0,4 0,9 2,6 1,3 3,0 Wood and paper products 1,9 0,3 1,0 2,5 1,3 2,7 Other sectors (incl. agri.) 10,8 6,1 0,2 0,5 6,3 6,6 Services 21,2 0,4 1,0 2,2 1,4 2,6 Total EU exports to Japan 61,0 14,1 13,7 29,4 27,8 43,4 25

26 Baseline trade volume Removing Tariffs Min. NTM Max. NTM Combined scenario Min Max Chemicals 9,0 1,5 2,8 7,6 4,3 9,1 Electrical machinery 8,8 2,2 1,5 4,0 3,7 6,2 Motor vehicles 20,2 15,9 4,2 11,3 20,1 27,2 Other transport equipment 4,4 1,5 0,9 2,8 2,4 4,3 Other machinery 25,0 3,2 0,3 1,5 2,9 1,7 Metals and metal products 1,3 0,7 0,2 2,5 0,8 3,1 Other sectors (incl. agri.) 3,5 0,7 0,3 0,6 0,9 1,2 Services 16,4 0,3 0,5 1,3 0,2 1,0 Total Japan exports to EU 88,6 25,2 10,1 28,5 35,3 53,8 26

27 Combined maximum scenario Tariffs Min. NTM Max. NTM (in bln/year) European Union Japan Note: baseline without Doha and EU-Korea FTA 27

28 EU and JPN PP markets: about 19% of GDP Estimated at 565 bln in JPN (2007) Less than 23% open to EU tenders (high threshold, low commitments, exception rule) In EU: 70% open to JPN tender 28

29 Aircraft market in JPN 4.5 bln : 10% EU, 85% US Worldwide: EU/US equal split EU exports could go up by 2 bln Railway equipment market in JPN: 2 bln /y EU share: 3% Worldwide: EU share = 60%, JPN = 10% 29

30 Rules exist, weak enforcement JPN ranks low on OECD competition indicators Services sectors: Very closed to import competition, High access costs Low productivity growth in services 30

31 31

32 Sector Tariff elasticity Importer specific factor Imputed Trade Cost Equivalent (TCE) EU Japan EU Japan Chemicals 3,315 1,292 1,296 32% 32% Pharmaceuticals insign. 1,418 1,680 Cosmetics 0,639 2,076 1,713 96% 93% Machinery insign. 1,663 2,914 Electronics 5,461 0,975 2,665 16% 39% Office 2,193 1,102 2,054 39% 61% Medical 3,250 1,289 2,127 33% 48% Automotives insign. 1,673 2,500 Aerospace insign. 0,676 3,971 Food 1,352 1,202 0,767 59% 43% Iron 6,386 1,283 2,241 18% 30% Textiles 3,058 0,688 1,419 20% 37% Paper 5,993 1,523 2,233 22% 31% 32

33 Sector NTB trade costs US exports to EU NTB trade costs EU exports to US Financial services 11,3 31,7 ICT services 14,9 3,9 Insurance 10,8 19,1 Communications 11,7 1,7 Construction 4,6 2,5 Other business services 14,9 3,9 Personal, cultural & recreational services 4,4 2,5 Chemicals 23,9 21,0 Pharmaceuticals 15,3 9,5 Cosmetics 34,6 32,4 Electronics 6,5 6,5 Office & communications equipment 19,1 22,9 Automotive 25,5 26,8 Aerospace 18,8 19,1 Food & Beverages 56,8 73,3 Metals 11,9 17,0 Textiles & clothing 19,2 16,7 Wood & paper products 11,3 7,7 33

34 Baseline (%TCE) Trade Cost for exports to Japan Lower bound (% pt change) Upper bound (% point change) Food and beverages* Chemicals (incl. pharmaceuticals)* Electrical machinery Motor vehicles* Transport equipment (incl. aircraft and rail)* Metals and metal products Wood and paper products Other machinery (incl. medical devices)* Air transport Water transport Finance* Insurance Business and ICT Communications* Construction Personal, cultural, other services

35 Baseline (%TCE) Trade Cost for exports to EU Lower bound (% point change) Upper bound (% point change) Food and beverages n.a. Chemicals 18,0 7,3 12,1 Electrical machinery 4,5 1,7 2,8 Motor vehicles 16,3 3,5 5,3 Transport equipment 18,8 3,1 5,6 Metals and metal products 6,0 1,9 5,2 Other machinery n.a. Air transport 2,0 0,4 1,1 Water transport 8,0 1,4 4,5 Finance 11,3 2,9 7,0 Insurance 10,8 2,8 5,6 Business and ICT 14,9 2,5 4,3 Communications 11,7 4,3 8,2 Construction 4,6 1,9 2,6 Personal, cultural, other services 4,4 1,0 2,5 35